Tribunal offers guidance on minimum wage law

The Employment Appeal Tribunal (EAT) has provided guidance on situations where deducting wages for training costs and accommodation expenses could put employers in breach of minimum wage law.

HMRC v Ant Marketing Ltd concerned an employer who required all new operatives to undertake mandatory, paid induction training. Due to the expense of this training, operatives were expected upon commencement of employment to sign a training agreement, which outlined that they must remain in the service for at least 12 months otherwise they would be liable to repay some of the training costs dependent upon the time they remained employed.

Some of the workers were also tenants in several local flats, which were not owned by the employer but by a separate company with the same managing director. Some of the workers asked for their rent to be deducted from their wages and paid to the separate company, although not a requirement of their employment. The employer was later issued with national minimum wage (NMW) underpayment notices by HMRC because the workers’ wages had fallen below the NMW after training and accommodation costs were deducted. The employer appealed against these notices to the Employment Tribunal (ET) which considered the issues separately, later dismissing part of the appeal.

The deductions fell within the remit of Regulation 13 of the National Minimum Wage Regulations 2015 (NMWR). As training was a mandatory requirement for the operatives, the employer was in breach of the law by deducting the cost from their wages if they left the job early. Their appeal was upheld, however, when looking at the accommodation issue. Although the rent paid through deduction did exceed the accommodation offset, the crucial point was that the flats were not technically owned by the employer itself. Therefore, accommodation offset rules were not engaged.

Both the employer and HMRC appealed against the two rulings respectively.

The employer argued that the ET had misinterpreted Regulation 13 of the NMWR, disputing that recouping training costs was a deduction for the purposes of this Regulation. However, the EAT upheld the ET’s ruling, agreeing that the training was mandatory, and deductions should not take wages below NMW.

In relation to the accommodation issue, HMRC argued that the ET should have taken a ‘purposive’ approach to the interpretation of Regulation 10 of the NMWR. This was because the legislation had been designed to protect the rights of low-paid workers from employers seeking to recoup their wages through accommodation. In this situation, the idea that the employer and the landlord were the same was also dismissed by the EAT which found that if it were to interpret Regulation 10 the way HMRC did, it would effectively be re-writing this statute.

This ruling sends a clear message regarding the issue of deductions from wages, particularly for training. The training costs deducted in this case impermissibly took the workers’ wages below NMW, so employers should ensure that training agreements which act to deduct money, in relation to mandatory training, do not take wages below NMW.

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